Iron ore is tumbling ahead of key industrial and construction data from China

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Iron ore continues to tumble, falling to a fresh 11-month low on Tuesday on the back of renewed weakness in Chinese steel prices.

And with futures remaining under pressure overnight, there’s little evidence to suggest that lower prices are prompting renewed demand from buyers.

According to Metal Bulletin, the spot price for benchmark 62% fines slumped 2.75% to $53.36 a tonne, extending its decline from the multi-year high of $94.86 a tonne struck on February 21 this year to 43.7%.

It was the largest one-day percentage fall since June 5, and the fourth decline in the past five sessions, leaving the price at the lowest level since June 24 last year.

As seen in the daily chart below, it’s seemingly one step forward, two steps backwards for the benchmark price at present.

The weakness in the benchmark was also evident across the grades, although the losses were far smaller in scale.

The price for 58% fines fell 1.3% to $37.47 a tonne, while Brazilian ore with 65% Fe content slid 0.85% to $70.30 a tonne.

Analysts at Metal Bulletin said the decline followed renewed weakness in Chinese spot steel markets, prompted by a slump in futures during Tuesday’s session.

“China’s spot rebar prices retreated on Tuesday following a dive in the futures market,” it said. “The sharp drop in the paper market made sentiment in the spot market bearish again.”

The most actively traded October 2017 rebar future on the Shanghai Futures Exchange finished Tuesday’s day session down a massive 3.14% at 2,935 yuan per tonne.

The group also said that wet weather may have played a role, potentially hindering construction activity across many parts of the country.

“Traders in east China made big cuts to their prices in the hope of clearing more of their inventories amid worries of rainy days ahead,” analysts at the group said. “Concerns over wet weather over most parts of east and south China also resulted in many buyers putting off their procurement plans.”

Whether due to the weather or other factors, the weakness in Chinese commodity futures continued overnight, although rebar futures managed to close above its earlier lows.

It closed overnight trade down 0.9% at 2,968 yuan, well off the lows of 2,930 yuan per tonne seen earlier in the session.

Despite the modest rebound in rebar futures, iron ore futures traded separately on the Dalian Commodities Exchange continued to grind lower, closing down 2.34% at 417 yuan per tonne.

That was below the 418.5 yuan per tonne level it finished Tuesday’s day session.

Coking coal and coke futures also finished in the red.

SHFE Rebar ¥2,968 , -0.90%
DCE Iron Ore ¥417.00 , -2.34%
DCE Coking Coal ¥947.50 , -1.35%
DCE Coke ¥1,436.00 , -0.86%

Trade in Chinese futures will resume at 11am AEST, one hour before the release of Chinese industrial output and urban fixed asset investment (FAI) figures for May.

There’s likely to be plenty of eyes on the property construction data in the FAI report, along with crude steel output in the industrial output release, and could be influential on the performance of Chinese futures later in the session.

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